Settlement Reached in Coinbase Insider Trading Case: What Impact Will This Have on the Industry?

Coinbase insider trading settlement - impact on industry?

Author: Ronaldo Marquez, bitcoinist; Translation: Blockchain Knight

SEC announced that former Coinbase product manager Ishan Wahi and his brother Nikhil Wahi have reached a settlement on insider trading charges , with Ishan Wahi helping to coordinate Coinbase’s public listing announcement, including information about Crypto assets available for trading.

Despite being warned not to trade based on this confidential information, Ishan repeatedly disclosed the timing and content of the upcoming listing announcement to his friend Sameer Ramani.

It is alleged that prior to the release of these announcements, Nikhil Wahi and Ramani purchased at least 25 Crypto assets, nine of which were securities, and sold them shortly after the announcement was made to profit from the sale.

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According to the SEC announcement, as part of the settlement agreement, Ishan and Nikhil have agreed to a permanent ban on violating securities laws and rules and will pay disgorgement fees and pre-judgment interest on the “ill-gotten gains”. In addition, considering the Wahi brothers’ prison sentences, the SEC decided not to seek civil fines against them.

In addition to the SEC’s charges, Ishan and Nikhil also admitted to conspiracy to commit telecommunications fraud in a criminal case. Ishan was sentenced to 24 months in prison and forfeiture of 10.97 Ether and 9440 Tether, while Nikhil was sentenced to 10 months in prison and forfeiture of $892,500.

Furthermore, SEC Enforcement Director Gurbir S. Grewal stressed in a statement that federal securities laws do not exempt Crypto asset securities from insider trading prohibitions.

He also expressed gratitude for SEC staff’s successful resolution of the matter: “ While the technology involved in this case may be new, the conduct is not. We charged Ishan and Nikhil Wahi with trading securities based on inside information, which is classic insider trading. “.

Coinbase has filed a petition with a federal court seeking to force the SEC to participate in rulemaking related to digital assets. The petition alleges that the SEC unreasonably delayed responding to Coinbase’s rulemaking request and decided not to participate in the process Coinbase requested.

The SEC did not deny that its delay in responding to Coinbase’s petition was unreasonable, and if the agency decides not to participate in the rulemaking process, a writ of mandamus would be reasonable. The SEC also argued that it is still actively considering its regulatory approach.

Additionally, Coinbase believes that the SEC has no intention of participating in Coinbase’s requested rulemaking, a point that can be seen from SEC Chairman Gary Gensler’s public statements.

Coinbase’s position is that the Chairman’s repeated and unequivocal statements about the Commission’s rulemaking plans provide powerful evidence that the SEC has no intention of participating in Coinbase’s requested rulemaking.

The SEC has been criticized for failing to provide clear regulatory guidance and effective communication to the crypto industry.

In this case, Coinbase believes that the SEC has failed to establish rules that would provide the industry with a standard for determining whether digital assets are securities or provide feasible registration pathways when necessary, leaving the industry in a “Catch-22” situation.

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